The benefits of managing your service operations as a profit centre as opposed to a cost centre.
Field service organisations face a number of pertinent challenges, not least trying to remain profitable in a highly competitive marketplace. But have you ever thought that the way you view your service operation may have a significant impact on how successful it is?
Firstly, think about how you currently view your service operation. Do you see it as a cost centre, where success is defined by reducing the costs it incurs? Or do you see it as a profit centre, where a number of different KPIs are considered when assessing performance? If the latter, you’re on the right path. If you still view cost reduction as your primary concern, though, you may need a rethink.
As proof of this point, research from the Aberdeen Group State of Service Management 2014 revealed that 94% of Best-in-Class companies manage their service operations as a profit centre. They are also able to achieve higher profit margins – 35% for Best-in-Class companies compared to the industry average of 22%. This is as good an indicator as any that doing so is almost a necessity now.
So, what advantages does managing your service operations as a profit centre bring
Operations aligned with business goals
When managing service as a profit centre, your operations are more likely to be aligned with your business goals. This is because operating as a profit centre requires a more holistic approach; success relies on a number of factors. On the other hand, when managing as a cost centre your approach is generally narrower due to the increased focused on cost compared to other factors. The Aberdeen Group’s State of Service Management: Roadmap to a Profitable 2014 report also asserts that companies managing their service operations as a cost centre face a challenge aligning internal resources with service objectives.
You’re more likely to focus on contracts that make money
Rather than taking a ‘grab everything’ approach to new business, top companies prioritise new deals that will generate profit. It can be difficult to turn down work, but top companies are able to do this if they know that a new deal is unlikely to generate sufficient margins to be worthwhile. When managing your service operations as a profit centre, this issue remains at the front of your mind.
A customer focus can be maintained
A worry with running your service operations as a profit centre may be that your customer service levels decline as focus shifts elsewhere. This certainly does not need to be the case. Instead, it provides an opportunity to make sure you are delivering a great service while your business benefits as a whole. The Aberdeen report talks of marrying a customer first mindset with efficiency, so you maintain your customer focus but also make sure you’re delivering an efficient service that has a positive impact on your bottom line.
For a great example of this, take a look at our case study with Sovini. They have managed to achieve exceptional customer service levels (satisfaction rates of 98%) while improving efficiency and ultimate improving their bottom line.
If you’re interested in making your company more efficient and improving profitability, perhaps you also need to review the systems you have in place for managing your field service operations. Why not find out more about Oneserve’s solution or get in touch to find out exactly how we can help you.